Swedbank presents the Second Quarter Results 2014
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Swedbank reported stable results in the second quarter of 2014. Net profit increased by 389 million Swedish krona compared to the first quarter. Total income grew due to higher commission income and one-off income from the acquisition of Sparbanken Öresund. Total expenses also increased, partly due to one-off costs related to Sparbanken Öresund. Asset quality remained strong with low credit impairments. Capital ratios improved following regulatory approval of an advanced internal ratings-based approach.
Swedbank presents the Second Quarter Results 2014
- 1. © Swedbank Swedbank’s second quarter 2014 results Michael Wolf, CEO Göran Bronner, CFO Anders Karlsson, CRO
- 2. Stable result 2 Swedish Banking - excluding Sparbanken Öresund SEKm Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Net interest income 3 314 3 314 -71 Net commission income 1 771 1 649 121 283 Other income 604 459 146 206 Total income 5 689 5 422 267 418 Total expenses 2 491 2 443 48 144 Profit before impairments 3 198 2 979 219 275 Credit impairments 21 31 -10 -39 ROE, % 30.5 28.3 C/I ratio 0.44 0.45 • Lower deposit margins • Mortgage margins – Improved towards end of quarter • Volume growth both in private and SME segments • Higher market activity supports commission income • One-off income from Entercard Volumes, SEKbn Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Loans 970 949 21 51 Deposits 389 379 10 10
- 3. Sparbanken Öresund impact in Q2 3 Sparbanken Öresund SEKm Ordinary business One-offs Total Net interest income 48 48 Net commission income 18 18 Other income 13 461 474 Total income 79 461 540 Staff costs 47 393 440 Other expenses 39 222 261 Total expenses 86 615 701 Credit impairments 4 4 Tax expense -2 -135 -137 Profit for the period -9 -19 -28 Volumes, SEKbn Loans 16 Deposits 12
- 4. Stable result 4 Swedish Banking – including Sparbanken Öresund SEKm Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Net interest income 3 362 3 314 48 -23 Net commission income 1 790 1 649 141 301 Other income 1 077 459 618 679 Total income 6 229 5 422 807 957 Total expenses 3 192 2 443 749 844 Profit before impairments 3 037 2 979 58 113 Credit impairments 25 31 -6 -35 ROE, % 29.7 28.3 C/I ratio 0.51 0.45 Sparbanken Öresund impact: • Total income SEK 540m – Of which SEK 461m in one-off bargain purchase (badwill) • Total expenses SEK 701m – Of which SEK 615m in one-off restructuring costs Volumes, SEKbn Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Loans 987 949 38 68 Deposits 401 379 20 23
- 5. Good customer activity • NII – Loan volume growth – Lower accrued fees • Continued high customer activity – Corporate finance – DCM • Good cost control • Risk awareness going forward 5 Large Corporates & Institutions SEKm Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Net interest income 846 867 -21 79 Net commission income 496 630 -134 184 Net gains and losses 575 565 10 58 Total income 1 945 2 099 -154 306 Total expenses 804 834 -30 69 Profit before impairments 1 141 1265 -124 237 Credit impairments 21 -30 51 -177 ROE, % 23.1 26.9 C/I ratio 0.41 0.40 Volumes, SEKbn Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Loans 157 152 5 6 Deposits 98 99 -1 29
- 6. Strong revenues • No financial impact from the crisis in Ukraine • Increased market activity • Good cost efficiency 6 Baltic Banking SEKm Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Net interest income 894 874 20 263 Net commission income 522 429 93 118 Total income 1 596 1 465 131 401 Total expenses 621 607 14 45 Profit before impairments 975 858 117 356 Credit impairments -16 -101 85 -4 ROE, % 15.6 15.2 C/I ratio 0.39 0.41 Volumes, SEKbn Q2 14 Q1 14 ▲ Q/Q ▲ Y/Y Loans 122 118 4 3 Deposits 122 117 5 12
- 7. Strong result 7 Group results – including Sparbanken Öresund SEKm Q2 14 Q1 14 ▲Q/Q ▲Y/Y Net interest income 5 521 5 483 38 242 Net commission income 2 813 2 693 120 593 Net gains and losses 773 345 428 265 Other income 1 348 799 549 614 Total income 10 455 9 320 1 135 1 714 Total expenses 4 919 4 226 693 976 Profit before impairments 5 536 5 094 442 738 Credit impairments 30 -100 130 -218 Other impairments 70 135 -65 -252 Tax 1 063 1 074 -11 248 Profit from continuing operations 4 369 3 980 389 955 • Growth • Mixed margins • Strong commission income • One-offs • Meeting cost target • Integrating Sparbanken Öresund ROE continuing operations, % 16.6 14.6 Cost/income ratio 0.47 0.45 CET1 Capital ratio, % 20.9 18.3
- 8. Reduced REA following A-IRB approval Capital 8 • REA decreased by SEK 42bn to SEK 406.7bn during the quarter • A-IRB approval, Sparbanken Öresund acquisition and higher lending volumes impacted the most • No regulatory excess capital * * Including equity investment in Sparbanken Skåne, SEK 1.7bn Swedbank REA development 18.3% 20.9% 10% 12% 14% 16% 18% 20% 22% 24% Q1 2014 Q2 2014 CET1 capital ratio 448.8 16.3 12.3 0.7 4.7 0.1 0.2 - 72.9 - 1.6 - 1.4 - 0.3 406.7 340 360 380 400 420 440 460 Mar 2014 Advanced IRB Sparbanken Öresund and Sparbanken Skåne Exposure change Rating migrations LGD FX credit risk Other credit risk CVA risk Market risk Operational risk Jun 2014 SEKbn Increase Decrease
- 9. Strong asset quality • Low risk position confirmed by Fitch and S&P 9 Asset quality Credit impairments, SEKm Q2 14 Q1 14 Swedish Banking 25 31 Large Corporates & Institutions 21 -30 Baltic Banking -16 -101 Group Functions & Other 0 0 Swedbank Group 30 -100
- 10. Swedbank’s second quarter 2014 results Q & A
- 11. Appendix
- 12. Long-term financial impact from Sparbanken Öresund • P&L impact 2016-2017 – Estimated net profit contribution of SEK 350-450m – Incremental RoE to reach group target 2016 • Long term – Estimated net profit contribution of at least SEK 500m – Incremental RoE >25 per cent 12 Sparbanken Öresund
- 13. Sparbanken Öresund – ownership structure 13 Sparbanken Öresund Sparbanken Skåne + 8 Spb Öresund branches Sparbanken 1826 Swedbank Sparbanken Öresund Sparbanksstiftelsen Öresund Sparbanksstiftelsen Gripen Today 22% 78% Before transaction Sparbanksstiftelsen Färs & Frosta Sparbanksstiftelsen 1826 100% Färs & Frosta Sparbanken Öresund Swedbank 70%30% Sparbanksstiftelsen 1826 Sparbanksstiftelsen Färs & Frosta Sparbanksstiftelsen Öresund 26% 22% 100%26% 26%
- 14. Sparbanken Öresund - Facts 14 Sparbanken Öresund Split up of Sparbanken Öresund Swedbank Skåne (1 Sparbanken Öresund Swedbank Sparbanken Skåne Current Proforma Increase % Employees 559 447(2 112 410 857(2 109 Branches 24 16 8 27 43 59 Customers 204 700 108 300 96 400 482 000 590 300 22 o/w Corporate (3 15 700 8 300 7 400 38 000 46 300 22 o/w Private 189 000 100 000 89 000 444 000 544 000 23 Lending, SEKbn 25 16 9 14 30 114 Mortgages, SEKbn (4 33 17 16 56 73 30 Deposits, SEKbn 24 12 12 34 46 35 Other (AUM, etc), SEKbn 20 10 10 34 44 29 1) In addition, one branch in Lomma will be sold to Swedbank by Sparbanken Skåne 2) Of which 61 relate to Cerdo Bankpartner 3) Includes micro corporates 4) Sparbanken Öresund is a distributor of SBAB mortgage loans. Volumes will gradually move to Swedbank’s balance sheet.
- 15. Conservative provision ratio 15 Asset quality * Russia and Ukraine reported as discontinued operations SEKm 10 951 9 934 7 077 4 429 4 047 3 570 2 818 2 514 2 343 2 040 1 774 1 545 1 420 1 398 1 325 1 256 1 238 1 211 64% 65% 62% 57% 54% 53% 54% 60% 56% 0 5 000 10 000 15 000 20 000 Q212 Q312 Q412 Q113* Q213* Q313* Q413* Q114* Q214* Individual provisions Portfolio provisions Provision ratio Provision ratio, % Q2 14 Swedish Banking 62 LC&I 119 Baltic Banking 50 Group 56
- 16. 0.5 7.4 1.5 3.4 1.3 1.5 0.6 2.4 0.7 3.0 0.2 0.7 1.8 0 2 4 6 8 10 Cruise Drilling & exploration Oil service Supply Accommodation Floating production Chemical Product Crude oil Gas (LNG/LPG) Dry bulk Container RORO Q2-14 Q1-14 Shipping and offshore 16 Credit portfolio – Large Corporates & Institutions • Lending exposure to Shipping & Offshore sector of SEK 26.0bn - Portfolio duration 3.77 years (weighted on commitments) - Average fleet age 7 years - Strong employment profiles Shipping and Offshore Portfolio by currency, SEKbn Shipping and Offshore Portfolio by subsegment, SEKbn 0 5 10 15 20 25 SEK EUR USD NOK JPY Q2-14 Q1-14 16 5 4 23 26 25 26 25 26 0 10 20 30 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 SEKbn Offshore Tanker Other Shipping and Offshore
- 17. 0 10 20 30 40 50 60 70 80 90 100 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Covered bonds Senior unsecured Lower funding needs • LCR 123% (Swedish FSA definition FFFS 2012:6) • NSFR 102% (Basel committee) • Issued SEK 69bn of term-funding in H1 2014, of which SEK 32bn in Q2. • FY 2014 funding plan of SEK 120bn 17 Liquidity and funding Term funding issuance – completed and planned SEKbn
- 18. 18 Long-term funding maturity profile • Funding plan of SEK 120bn to meet next 12 months’ nominal SEK 101bn maturities • All remaining government guaranteed debt (issued in 2009) matured in May 2014 Long-term funding maturity profile, by funding source Liquidity and funding SEKbn 0 50 100 150 200 2014 2015 2016 2017 2018 2019 2020- Senior unsecured debt Covered bonds
- 19. Prefunded in excess of 12 months 19 Liquidity and funding SEKbn Days forward 1 As defined by the Swedish Bankers’ Association 0 50 100 150 200 250 300 0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 365
- 20. Real estate prices – Sweden 12 months development 20 Swedish housing and mortgage market Single-family homes1 Tenant-owner rights2 Combined3 12M Δ 12M Δ 12M Δ Jul/13 4% 9% 6% Aug/13 5% 11% 7% Sep/13 5% 11% 7% Oct/13 6% 11% 8% Nov/13 4% 13% 7% Dec/13 4% 13% 7% Jan/14 7% 13% 9% Feb/14 7% 13% 9% Mar/14 7% 13% 9% Apr/14 8% 12% 9% May/14 8% 12% 9% Jun/14 8% 11% 9% Source: Valuegard www.valuegard.se (Based on data from Mäklarstatistik), 1 HOXHOUSESWE, 2 HOXFLATSWE, 3 HOXSWE
- 21. 0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Vilnius Nr.of deals EUR/m2 0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Tallinn Nr.of deals EUR/m2 Baltic countries Real estate prices 21 EUR/m2 /Nr of deals EUR/m2 /Nr of deals EUR/m2 /Nr of deals 0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Riga Nr.of deals EUR/m2